How to reduce your expenses, so you can live without a salary!

Not physically, of course, but virtually. My interests have gone beyond the topic of this blog, and while I would love to be able to keep up with all my blogs, I simply cannot. Therefore, I am moving my future posts to my new blog, “The Meaning of Life, Love and Everything“, which is a hail to “The Hitchhiker’s Guide to the Galaxy”. This new blog will feature all my thoughts about the weird, the insane and the ridiculous that life has to offer, and it will contain all my rantings. Who I am is someone who cannot be contained with one topic for a blog, so therefore, I am consolidating all my rants and raves into one blog. This way, you get to see more of who I am, why I am, and maybe find something else out about yourself in the process. These posts already on this blog will remain, but I will not be updating this one anymore.

In medicine, many illnesses and diseases tend to have “itis” attached to the end of a word. Dermatitis–a condition affecting the skin…appendicitis–an inflamed appendix…debtitis–a condition that affects the mind in that the victim must spend too much money and get into debt. When attached to a common word like debt, it then indicates that there is a sickness present. And let me say that there is a sickness present with credit card debts! While many experts think that there are ways to cope with credit card debt-itis, the only way to get rid of this condition is to get rid of the credit cards. Only then can the victim really start the healing process. Get rid of the credit cards, and then follow the 3 step plan to curing yourself of credit card debt-itis.

Planning

The first part of planning is to make a list of the charges you incurred while afflicted with credit card debt-itis. At the very least, if you are in too deep because of your illness, just write down the name of the credit card and the amount you owe on that card.

Next, write down how much income you have each month. Include your salary and any other side income you get. On the other part of the paper, write down all your expenses for the month, excluding your debts from credit card debt-itis. Look at where you can fit in payments on your debt, and work these payments in. Then re-work your expenses to include your debt repayment plan.

Executing

This next step is the most painful to complete. Cures are never easy, but getting over credit card debt-itis and staying cured is very worth the pain. After the planning phase of your cure is complete, then you must actually write the checks and pay down these debts. Cures take action, and you must take action. If you stop paying down these debts, your debt-itis will come back even stronger. It is in your best interest to continue with the cure.

Evaluating

Completing the first two phases of your cure are the hardest part of the healing process. After you have made significant progress in paying down your debts, evaluate your accomplishments. Have you paid down many of your debts? Are the balances going down significantly every month? If they are, then consider the cure effective and finish up with your cure. If not, look at where else you can take money from to pay on your debts. Go back to the planning phase and start again. Credit card debt-itis will not go away on its own, and must be treated for you to get better.

Freedom At Last

You may not realize how much you are suffering from credit card debt-itis until you get free from its grasp. Tossing and turning every night, worried about your debts is a sure sign that you are suffering from credit card debt-itis, and when you are finally cured, you will find that sleep comes easily. Also, when you are free, you will also be able to breathe easier…so take the first steps today to cure yourself of the dreaded credit card debt-itis. It can only get better from here.

Sometimes, I wonder if people realize the economic cost of divorce. To say nothing of the emotional and mental costs…divorces hurt, and they hurt bad. It’s never a good thing when couples split up after being together for a long time. (It also hurts when they have been together for a short period of time, but that is not what this is about.) The pure cost of a divorce can be staggering, and it’s not just the lawyer fees and court costs–it’s life after a divorce that becomes expensive. If there are children in the mix, there’s child support along with everything else. Of course, if a couple has been married 10 years or more, the spouse not making as much money usually gets spousal support. Whether the other spouse wants to or not, this is what the law allows. Budgeting and planning during this time can really be a nightmare. Here’s how to keep your sanity, as well as some of your money.

Know Your Boundaries

There is a certain limit that all of us have when it comes to money and time. If you are not clear on these, there are ways to figure this out. First, you want to get very clear on what the plan is when you do split from your spouse. Are you going to live in an area that is relatively expensive, or will it cost less where you are moving to? If there are kids, are you going to share custody or will there be an unequal amount of custody? These issues will determine who gets what and how much. It will also determine how much you need to live on compared to your spouse. And if your spouse seems reluctant to share anything, it may be best to speak with a lawyer instead of your spouse. This will save time and your sanity. And if your income is low, you could seek out a volunteer or pro bono lawyer who could give you some guidance. You must be clear on what is happening before you move forward, or it could become a lot worse.

Set Clear Limits

This is not the time to stay silent on what you want. Make a list of everything you need, including some wants in there. Be clear in what you are expecting and what your limits are. This will keep you from being stretched too much financially. If you are the spouse that needs the child support and/or spousal support, get very clear on how much you will need to maintain a household and take care of everyone’s needs. Set limits on how low you can go, because the other person may want to give the least amount possible. Create a boundary that the other person cannot cross.

If you are the spouse giving the financial support, realize that you made a commitment many years prior to take care of this person for life. This does not end just because the marriage ends–you will end up financially supporting that person for life. This will cost you some money, but if you think of the time your spouse invested in you, it may seem only a pittance for that.

Resistance Does Not Work

Compromise may be difficult during this time, but it is not impossible. Tensions are running high anyway, but not giving in to even the smallest requests will turn the entire process very ugly. Determine what you need or can give, and then build on that. As a supporting spouse, you do not need to be so selfish that your soon-to-be ex and children are living in squalor while you’re living the high life. And as a supported spouse, you also do not need to be that greedy where you are demanding every single penny. There is a middle road where everyone can have their needs met and still maintain some semblance of order and normalcy in their lives.

Common Sense Tactics

During a divorce, probably the last thing you want to think about is money, but this is the cornerstone of life–at least until a better solution comes along. Money makes living life a lot easier, and it one of the things that, if each spouse has enough to meet their needs, can smooth over a lot of other issues. There will still be healing that needs to occur, but it’s one less thing to heal about. Be reasonable and use common sense in all your dealings, as this could mean the difference between constant frustration or finding some peace.

Yes, this goes against what everyone is telling you these days–“Stop spending money”, or “Save your money”. But spending money can be good for the economy. There are the obvious reasons why this is true, such as it create jobs, helps small businesses stay in business, and other things like that. However, no one really talks about the real reason why spending money is good for the economy.

Money Goes ‘Round and ‘Round

Have you heard the expression, “Money makes the world go round”? You may have thought this meant that we need money to live on or survive. While this interpretation is true, it is not the entire story. The myth of money is that there is only a “fixed” amount of money in the world. Physically, this is true. However, this is not exactly the way things work. Money must circulate on a daily basis for the economy to be healthy. This is similar to the way blood must circulate constantly for the body and mind to be healthy. In fact, the body needs several thousand quarts of blood every day, but on any given day, there is only 5 quarts of blood in a body. How do we get what we need? It is circulated.

Money circulates in the same way. It changes hands from one person to another, creating a healthy economy. What one person’s extravagant spending is another person’s amazing successful income. Eventually, that money comes back again as income for you. If the circulation slows or stops, everything falls apart and we have a sick or dead economy.

Spending Responsibly

While spending money may be good for the economy, it may not always be good for your economy. What this means is that, while it is okay to spend money every so often for more than just your needs, it’s not always prudent to do so. You must prepare for your needs and some wants, but you do not want to spend so much that you are in debt and stressing out about your finances. If you strike a nice balance, then you do not have to feel bad about spending money on yourself every so often.

For some reason, annuities are touted as a “valid part” of a well-rounded investment plan for seniors. However, this is about as valid for investing as sugar cereals are healthy for a healthy diet. In other words, annuities should be avoided in order to maximize your returns on your investments. Anyone who tells you differently is trying to sell you something. To be fair, however, I will explain what they are and why they are used before getting into why you should not use them.

Annuities Explained

According to Wikipedia, “An annuity contract is created when an individual gives a life insurance company money which may grow on a tax-deferred basis and can then be distributed back to the owner in several ways. The defining characteristic of all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract. However, the majority of modern annuity customers use annuities only to accumulate funds and to take lump-sum withdrawals without using the guaranteed-income-for-life feature.”

Put simply, annuities are the investment portion of a whole life insurance policy. You either put in all your money at once, and choose to receive the payouts immediately, or you can pay into the annuity with installments and receive the payouts at a later date. The payouts are based on how the market performs, up until a 12% interest rate of return. You don’t lose money, but you also don’t receive much gain either.

Why They Are Used

People use annuities because they are promoted as a way to protect investments in an “uncertain market”. Annuities and life insurance provides death benefits, but they each have a different purpose. While life insurance provides a benefit if the insured dies early, annuities provide benefits if the insured dies late. Meaning if you were to outlive your retirement money. They are also used for protecting your investments, so you have money to live on when you are retired.

Beware!

That was the good part…now here is the part they don’t tell you. Annuities are designed to rip you off! How can I make such a bold statement? First off, think about who is selling your annuity to you–it’s not the investment brokers, but the insurance sales representatives. They are not even licensed by the Securities Exchange Commission (SEC) to sell you the annuity. How they can get away with it is because it is classified as an insurance product, rather than an investment product. Which means that they can get away with more than an investment broker could.

It’s Not Your Money

One thing that people are not aware of is that when they hand over their money to the insurance company to “buy” an annuity, they are giving up their rights to the money. “Wait a minute–are you telling me that the money I have is not mine anymore?” That’s exactly right–even though they tell you that you are “protecting” your money. So where does it go and who has control of it? If you guessed the insurance company, you’re right. They will take that money and invest it in the stock market just like anyone else could, and then pay you the dividends. However, the gotcha on this is that when you die, they are not obligated to give that money back to your survivors.

Your Bottom Line

It’s your money and your future that you are planning for. Don’t let it go down the drain just because some slick sales rep decides give you a slick presentation. Research your options before you sign on that dotted line and save yourself the headaches later on.

There was a time when plastic was reserved for toys and bottles. Everyone used cash and store credit, or they did not buy what they wanted until they had enough money saved up to buy it. Today, everyone carries credit or debit cards, or perhaps a few of each. While I am not delving into the subject of credit cards today, I do want to talk about debit cards, and more importantly, prepaid debit cards.

What Are Prepaid Debit Cards?

Similar to bank debit cards that are connected to your checking account, a prepaid debit card works only when there is money “on the card”, or placed in your account. You do not need a checking account, as this is basically an online checking account.

Benefits of Prepaid Debit Cards

With a prepaid debit card, there is no need to carry cash when you are out shopping. (I personally like carrying cash, but that is another story.) You can use it just like a debit or credit card at many major shopping venues. You can have your check directly deposited onto your card, and you can pay bills with it just like your checking account debit card. And if you have bad credit, this may help you get started building up your credit again. Many companies will approve you with bad credit.

Disadvantages of Prepaid Debit Cards

In spite of how many benefits are presented to you by slick marketing websites, there are a few disadvantages to having a prepaid debit card. The fees associated with the card may be more than you would find with a checking account. Some have an activation fee or monthly fees charged to your card. Others will have ATM withdrawal fees or bill paying fees. Even just to get a paper statement, you may find fees. If you have a choice, maybe the fees route may not work for you.

Bottom Line

Prepaid debit cards are not for everyone. But if you are just trying to get a clean credit history again, maybe this is the next best thing to a checking account. At least you will not have a large bill to pay because of your shopping activities, as the money is taken directly from your account.

“You can have a house full of new furniture for X dollars per month!” says the commercial for rent to own companies. These commercials are usually shown during the times when those most likely to fall for this scam are watching TV. And if you notice, most of these stores are located in the poorer neighborhoods, where people do not have as much money and would be enticed by such deals. However, these deals are not the bargains they are made out to be, and if you have ever fallen for this scam, you will know what I am talking about.

Example

Say you want to buy a furniture set for your living room, and you see an ad that has what you want for $27.99 per week. After looking at your finances, you realize that you can indeed afford that, so you sign up to get the furniture. They deliver it and it looks so nice in your living room! You’re thinking, “Why did I wait so long before doing this? It’s perfect!”

Yeah, perfect. Let’s take an analytical look at your “perfect” deal. First of all, that price is per week, which makes your monthly expense about $112. That is almost a car payment, which if you are driving a beat up wreck, would it not make more sense to buy a different vehicle? Okay, so you know that you are spending over $100 per month on your furniture, and you justify that if you buy a furniture set elsewhere, you would have to make payments as well. Let’s take a look at that aspect.

A Different Example

Suppose you went to a different furniture store that offers a payment plan, and you find a a set that you like that costs $859, with total finance charges of about $100, making the total price $959. They want you to pay $100 per month, and you think, “But I can get the other set for $27.99 per week.” Of course, now you can see that they are really $12 cheaper per month than the rent to own place.

The Scam

Here’s where the scam really comes in…how many weeks are you obligated to pay that $27.99 per week? According to the fine print, you would be paying on your set for 91 weeks. $27.99 times 91 weeks is $2,547.09. This amount is a lot more than $959! You would actually be paying 3 times more for the same set. In that same fine print, they admit that the set is only worth $859, but the finance charges are over $1,200!! Talk about predatory lending–this is much worse than a payday loan! You would be better off saving your money in a high yield savings account until you have enough money to buy a furniture set outright.

Alternative Options

Of course, there are always alternatives when contemplating buying something. And to get to alternatives, you must ask yourself if you “need” or “want” that furniture set. Does it really matter in the larger scope of life that you have that set? What other things can you do for seating options in your living room? A few ideas come to mind:

Get lawn chairs and place them in your living room. While this may not be the most comfortable option you have, it is a cheap option and if you do not have that much money to buy a furniture set, it can work for a while until you have enough money.

Use blankets to make cushions, and sit on the floor. This could work for a while if you have no money whatsoever to buy anything.

If you have a bit more money, you could buy a large beanbag-type item with foam in it. I personally have what is called a “sofa sac” and it is so comfortable! It cost about $359. But there are cheaper options for you to choose from.

Hand-me-down furniture can work too. If you know someone else is getting a new furniture set, ask if you can have their old set. Chances are, they will be glad to get rid of it without having to pay to have it hauled away to the dump. You can also sift through the free listing on Craigslist for furniture.

Do Not Fall for the Scam

Many other rent to own items are set up in the same way. You will often end up paying 2-3 times more than what the item is worth, leaving you with even less cash in your pocket. Instead, put that money to good use by either saving it or investing it so that you can earn some money on your money. Look for inexpensive ways to get what you need (or want) without having to rent to own it. Or, choose to do without that item. If more people chose not to give these companies the business, they will eventually have to go out of business.